Golfers set to fail if they sue clubs over VAT

Golfers are unlikely to be successful if they take action against golf clubs for not paying them back the overpaid VAT they paid, one of the UK’s leading tax experts has said.

Adrian Houstoun, a VAT partner at chartered accountant Kingston Smith LLP, has also criticised HMRC for its response to the European Union’s ruling that green fees at private members’ golf clubs must be exempt from VAT, which has meant that hundreds of clubs are hoping to claim back millions of pounds from the taxpayer. Visitors to private members’ golf clubs originally overpaid the money. He has also called for private members’ golf clubs to make a protective claim immediately. This comes as another VAT expert has said that clubs may not get the money they hope to, while a tax campaigner has said the reduction in duty for bingo at the Budget shows the need for golf clubs to have a united voice. “Tosh Webster is a keen golfer who has paid several thousand pounds in visitor green fees over several years,” said Mr Houstoun. “He says that he will approach several golf clubs demanding his VAT refund, on the basis that he has paid the club VAT that he should not have paid, and that the club should get the VAT back from HMRC and pass on the refund to him. He has even suggested that if the golf clubs deny him his refund he may sue them. “Does Tosh have a realistic chance of obtaining a refund? It is unlikely, but not impossible; it depends upon the terms and conditions that applied when he paid his visitor fees. If a golf club advertised the cost of playing with no mention of VAT, which under consumer legislation is quite likely, the golf club would be in a strong position to deny the refund, especially if the green fee price stays the same once it changes from standard rated to VAT exempt.”

Houstoun went on to say that a VAT case involving Marks & Spencer socks has meant that if green fees are not reduced after they become VAT exempt the golf clubs are demonstrating that they absorbed the cost in the first place, rather than the golfer. “In any event, in this situation it is likely that the golf club would only get the refund from HMRC on condition that the club refunded the players, under a concept know as unjust enrichment,” he added. Houstoun added that private members’ clubs that haven’t yet made a protective claim risk losing income. “Whilst golf clubs may decide, for the present, to continue charging VAT on visitor green fees until such time as HMRC amend their guidance, the one action they should take is to make a protective claim covering the last four years,” he said. “As you can only claim back four years’ worth of VAT from the time of making the claim, by delaying it you will reduce your potential refund.

“One golf club said that it had over 10,000 visitors last year, which equates to over £900,000 of revenue and over £150,000 of VAT paid to HMRC. From this, you will have to deduct the irrecoverable input tax on costs and overheads, which is likely to have increased by having a greater amount of VAT exempt income than you thought you had when you accounted for VAT on green fees, under what is known as partial exemption. Clearly, the potential figure for four years for many clubs will be very material.” However, Robert Twydle, of Hillier Hopkins LLP, believes that clubs may not benefit from the ruling as much as they think. “In most clubs they will no longer have any VAT-able income that relates to the course, with the effect that potentially none of the VAT incurred thereon will be recoverable,” he said. “Our initial calculations show that for clubs with an average annual spend of £150,000 on course maintenance and machinery, the additional irrecoverable VAT could increase by over £17,000. The result is that for the club to be better off, green fee income will need to be over £85,000 net of VAT and this assumes that green fees remain at the current VAT inclusive prices. “It will be a fact that the amount of irrecoverable VAT suffered by clubs will increase and many smaller clubs could be worse off following this decision.” Meanwhile, Adrian Houstoun has launched a scathing attack on HMRC for its response to the ruling, which was made more than three months ago. “When HMRC won their argument earlier in the legal process, they issued a brief denying favourable VAT treatment roughly three weeks later; however, now that they have lost, they have not yet issued a new brief,” he said. “Further, most businesses without professional representation would commence their enquiries about the VAT status of their transactions by consulting HMRC, which still states on its website that visitor green fees are standard rated. Supposing an American non-profit making golf course operator decided to start in the UK; he might open a golf course and, based on HMRC’s information, would start charging VAT on green and visitor fees!”

The developments come as the recent Budget reduced the VAT levied on all bingo halls from 20 to 10 percent – something that many golf clubs have called to happen to the golf industry. “We have been campaigning for reduced rate VAT in sport for 20 years and what do they do? They have reduced VAT to 10 percent on bingo! This is loopy,” said golf club owner Vivien Saunders. “The bingo industry is united. The sports’ industry isn’t.” The owner of a London golf club also joked that he would earn £30,000 per year extra if he simply replaced the word ‘Golf’ in the club’s name with ‘Bingo’.